There is no shortage of gas cartels, or fossil fuels, in Australia

If you want to understand the nature of Australia’s current energy crisis, look beyond the headlines and rhetoric from both sides beyond the fossil fuel fence, and just look at market prices.

Australian consumers – both big and small – are duped at gas stations, power sockets and gas pipelines by a large industry that is used to setting its own rules and regulations, and having its own way with markets and governments.

Australia is not short on gas, which is now clearly established. But what it also has to admit is that it has nothing short of gas cartel-like behavior, even if the country’s impotent regulators prefer to look the other way.

On Monday, something extraordinary happened. On the same day that the Australian government finally dared to call it a bluff, and threatened the imposition of the so-called “gas trigger”, prices fell in both the electricity futures market and the gas market.

It’s as if the fossil fuel industry has been caught red-handed, like a trillion-dollar toddler with his hands on a cookie jar, his pockets full of sweet candy and his mouth full of candy while protesting his innocence. He insisted, always, that he only had the customer at heart.

Gas prices fell in Victoria – from around $30 per petajoule to just $12, and in NSW from $30 to $20, with further declines expected to match Victorian prices.

In the electricity market, futures prices for “baseload” contacts in some markets experienced rapid change, plunging more than $15/MWh in a single day. Maybe it was just a coincidence.

Trying as hard as they can, regulators have struggled to find evidence of the game, only legal “re-offers”. Industry has even developed its own vocabulary – opportunistic costs, for example – to establish some kind of economic rationale, if not a moral justification, for consumer exploitation.

As energy analyst Dylan McConnell noted this week, the spectacular price fall was “fooled” by the fact that Australian gas producers, and many other parts of the industry, had enjoyed windfall profits at the expense of consumers, and justified it by pointing to international prices.

This is a story, as we have noted, of the fossil fuel industry that has lost all perspective, and has effectively given up its social license. But still he longed for more money and regulatory satisfaction.

Bruce Robertson, energy finance analyst with the Institute of Energy Economics and Financial Analysis, said the report from the Australian Competition and Consumer Commission that attracted so much attention on Monday had confirmed there was no gas shortage in Australia.

“This is a made-up shortfall. It doesn’t exist. There is a lot of gas – a shameful wealth – on the east coast of Australia,” he told RenewEconomy.

“What is happening is that these companies are just starving the gas market. That’s what they’ve been doing consistently since 2015.”

Robertson said the east coast gas market had all the features of a cartel, where only a few companies controlled 90% of supply, they had reportedly used anti-competitive practices, and they forced prices to rise above international levels. .

“What the ACCC report really underlines is that there is a gas cartel operating… the report forensically details these three things, but does not identify them as cartels.

“We have all this stuff going on, but they’re not really going to call it what in economic terms: a cartel.”

The clean energy industry has so far been able to launch some very effective attacks against gas cartels.

Most notable is perhaps the influence of the original Tesla big battery in South Australia breaking the cartel that had openly disrupted the frequency market by making all but 1MW of supply available at low prices, and then charging a lot of money for the remaining MW flowing in. through to the entire market.

The gasoline market is another example. The federal government previously cut fuel excise in half, and is now arguing that it was extended to protect consumers. The refiners, meanwhile, made huge profits and increased profits.

Wind and sun can sometimes break the reins of fossil fuel generators when they produce enough that they determine the price, not coal, gas or water.

So have other technologies such as demand response, but the existing fossil fuel industry has resisted such initiatives, including energy efficiency, tenaciously.

In the last two months, under the auspices of soaring international prices, the heritage industry – mostly but not exclusively fossil fuels – has been able to do what it wants, except when it goes too far and forces market operators to suspend markets.

In the UK, the government and regulators are fed up with it, and are now trying to design new markets that will ensure that low wind, solar and storage prices are not tainted by the practices of the fossil fuel industry cartels.

Robertson said the Australian federal government and regulators needed to take stronger and smarter action on the issues at hand, which meant thinking about alternatives such as efficiency and regulation rather than just supply.

“The idea that you can chat with these companies and ask them to play well just doesn’t sit well with the pixies,” he said.

“The same goes for the idea that we can produce more gas and that will lower the price. We have tried many times over the last six years and to no avail. We need to master and do something that will work.

“The cartel is illegal. Pricing is illegal… What we have is a government that attracts cattle to illegal pricing organizations to the detriment of the Australian people.”

Robertson also suggested that the developers of the large and duplicate LNG terminals around Gladstone in Queensland violated the approval requirements for their project, which is essentially a guarantee that export activities will have no impact on the domestic market.

“We also have governments that refuse to enforce the rules under which those conditions are made. They have a huge influence on prices and in many cases push them above international prices.

“One should call it what it is: pervert. We are being held for ransom by the cartel and the government refuses to prosecute.”

Many analysts suggest a windfall tax to ensure Australian consumers benefit from the huge profits made by the gas industry and the fossil fuel industry in general.

Robertson’s preferred solution was to reserve domestic gas in all fields, and force prices down to similar levels in Western Australia.

“This has to end – we will see massive job losses and real hardship for anyone who can’t afford it if we don’t do something. It’s not hard to do, it’s called the law it’s called government policy.

“We have to do it now. Like today, we need to start drafting these laws and make them happen. Get domestic gas reservations that set aside more than we need.”

We need more than that.

Greens Senator Sarah Hanson-Young on Tuesday noted the energy system, as it is, is clearly broken.

“This big gas company has been deceiving customers, consumers, households and small businesses for too long

“They made an unexpected profit. They don’t pay enough taxes. And they take Australians for walks. There is no shortage of gas here in Australia. We have a lot.”

But Hanson-Young said instead of greenlighting more gas and coal projects, “one of the things we really need to do is speed up the transition … our energy grid ensures we have it powered by renewable energy and storage. It will make power cheaper, more reliable, and push prices down very, very quickly.”

The NSW Coalition Government got it. Industry got it. Investors get it. Consumers get it. Why doesn’t the federal government get it?

See also: “Exciting and important moment:” NSW prepares for a major shift from coal to renewable energy

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